Investing.com — Oil prices stabilized Monday following the aborted revolt by Russian mercenaries over the weekend, although gains have dissipated along with concerns of a substantial threat to oil supply from one of the world’s largest producers.
By 08:55 ET (12:55 GMT), futures traded 0.3% lower at $68.98 a barrel, while the contract traded flat at $74.02 a barrel. Both benchmarks gained as much as 1.3% in early Asian trade.
Russian risk premium rising
The weekend’s mutiny in Russia by the Wagner Group of mercenaries has fizzled out, with a quick truce mediated by Belarusian President Alexander Lukashenko calming the situation.
However, there remains a great deal of confusion over what happens next in one of the world’s major oil producers.
“While the immediate supply risks have disappeared, the market will likely have to start pricing in a larger risk premium for oil given the growing instability in Russia,” said analysts at ING, in a note. “How much of a risk premium will really depend on how the aftermath of the failed insurrection is dealt with.”
OPEC predicts favorable future
Helping the tone were comments from Haitham al-Ghais, the Secretary General of the Organisation of the Petroleum Exporting Countries, at a conference in Kuala Lumpur earlier Monday.
“Oil is irreplaceable for the foreseeable future,” he said. “We see global oil demand rising to 110 million barrels a day by 2045,” pushing the world’s energy demand up by 23%.
Additionally, market fundamentals remain “sound” for the second half, said Saudi Aramco (TADAWUL:) CEO Amin Nasser at an industry gathering on Monday, as demand from emerging markets led by China and India will offset recession risk in developed markets.
Recovery from last week’s losses
Still, further gains are likely to be hard-won after both benchmarks fell between 3% and 4% last week on worries that further interest rate hikes by the U.S. , as well as other major central banks, could hit economic activity, and thus oil demand, at a time when China’s economic recovery has also disappointed investors.
There is important data due this week in Europe, as well as the in the U.S., and this could determine sentiment as traders fret about more monetary tightening.
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